Sell it or keep it?

the one thing ive learned by reading steves book is ask yourself one question when investing in property:

“What are you buying for? and how do you intend on making money from this investment”?

positive cash flow – earn money from day one?
negative gearing – cost you money now for possible capital growth in the future??

Why did you buy these investments in the first place? i presume capital growth, which most people do.

i do recommend to spend a little money on renovating. ive recently spent 10k on renovating one of my investment properties and it added a 30 – 40k to the price. doing simply things, change carpet, a major paint job..changing all light fittings and light switches, door knobs etc…makes a huge differnce to the appearance and therefore value.

if you want out of your second investment, the best advice is spend some money on upgrading. it goes a long way, and hopefully you receive a good price to pay out your loan.

alwayscurious

Now may not be the best time to sell – as there is a bit of a slump – depending on the location.

You don’t give the values for you properties, so that makes it hard to answer.

Depending on the values, selling all three in the one year may give you a big CGT bill. Since you wife is on a low income, it may be better to sell you wife’s unit as she would may the lowest CGT.

Also since you have a margin loan, you could sell your shares and use that case to help out. Again there would be CGT consequences.

Terryw
Discover Home Loans
North Sydney
[email protected]

Giday alwayscurious,
It almost sounds like you cross-colateralised?! How did you get 110% for your IPs? If that is so, you might have to sell ALL your properties, including your PPOR.
Hope I’m wrong, but I too would try to do all that is necessary to hold onto the IPs (its worth while in the long run).
There are several Mortgage Brokers on this site and others that deal with lending. Find them and give them all your info and see what they can do for you! You might have to refinance to change your situation from a down hill slide into a level plateau or even a climb.
If you’ve read Steve’s book, you’d have read him stating that +CF IPs are made not necessarily bought.
I’d like to encourage you to try before you toss in the towel, you can still do that after every other avenue has been closed off to you.
You’ll only ever know when you have a go.
Best wishes and keep us informed.

Cheers

C@34

alwayscurious,

I think your situation would be similar to many people’s. I wouldn’t panic. There may be other options to selling.

* Can your wife get a job?
* Can you take on some overtime?
* Are your rents at market rental or is there room for some increase?
* Are you due for long service leave or some other cash payment that you could use to alleviate some of the costs?

It is probably easier and quicker to get out of your share portfolio (SELL SELL!) than it is to get out of property (damper market, high costs of selling).

However, if you really are stressed out, then building a property empire isn’t everything.

I sold a property and then got myself into way more debt by buying a few more… but the sale of that property was a weight off my shoulders, and freed me up to do different things. Money isn’t worth having a heart attack over.

Have you spoken to your accountant to get his or her advice? The might have an exit strategy that you haven’t yet thought of. I think you’re probably right bout having to flog off only one property- at most. But selling is sometimes a really good idea- you don’t lose a property.. you gain some capital

kay henry

That’s hilarious, always! hehe. Actually, selling off underperformers at the top of the market is not a bad idea. It really depends on where your property is (booming suburb?) ands how long you’ve had the property (under one year and selling would not be good for CGT liability). The old adage of buy low, sell high… is as fundamental as “location location”, I reckon.

Selling is probably only an idea for underperformers though, or if you are super-stretched financially. My properties in NSW, for example, are buy and holds probably forever, because of the newly imposed exit duty. So I now buy properties that can live for the next 40 years, and not fall to pieces.

Thanks for the kitten analogy- it’s very funny!

kay henry

Always, I can see where you are coming from. In a house we had paid off and with 23 properties all our funds were keeping us afloat rather comfortably, when we bought our ‘dream home’ this year it has nearly crippled us.

The house we left in Sydney hasnt sold, our mortgage here is 1.2 mil we are now trying to sell 5 houses to kill 1/2 of that.

Sometimes the harsh reality is that you make major mistakes and then have to be ruthless to fix it. Try selling the 2 most negative and keep the third. One set of rates, body corp fees and maintainance will probably get you over the line. As rents go up too, look to the one that has the greatest potential for rent increases with small renos too. So you dont have to pay stamp duty and cap gains on the three sales, maybe next time you actually save 20% before getting into new ip’s.

That would mean that any growth can be used straight away. We bought one and due to location got a 65% lvr loan so we had to throw in a wopping $35k plus costs. 3 months later we got a val of $120k with a new lender got 76%. So we peeled 26k out 3 months after setting it up.

Think hard before borrowing more than any property is worth, and if you borrow 80% you always have a buffer.

Good luck, hope this helps.

DD

Don’t sweat the small stuff,and it’s all small stuff!!

Sounds like a good solution. Also some good luck with the rental return on IP 1. Take some time out, breath a sigh of relief, sit back and enjoy some peace of mind with your family.

Regards
Sonja